(Bloomberg) The co-founder of Premium Point Investments and a former trader pleaded guilty to charges they overstated asset values at the now-defunct hedge fund, but they won’t serve any time behind bars.
Anilesh Ahuja, the fund’s co-founder, and trader Jeremy Shor were found guilty of conspiring to overvalue the hedge fund’s assets by more than $100 million and sentenced to prison in 2019.
However, U.S. District Judge Katherine Polk Failla in Manhattan overturned their convictions in December due to errors and misleading statements by prosecutors.
The pair had faced a new trial but reached a deal with the government allowing them to plead guilty to a single securities fraud count.
Under the deal, which was approved by Failla in a hearing on Friday, the two men won’t serve any prison time, pay a fine or serve probation.
Let’s talk about it.
Welcome to Franknez.com – if you haven’t joined the newsletter, be sure to do that below. I’m publishing market news and updates daily.
Let’s dive right into it!
Join the newsletter to become part of an activist group fighting for market transparency!
Receive weekly market news to stay up to date.
Hedge Fund gets away with prison time and fees
Before their convictions were overturned, Ahuja was sentenced to more than four years in prison and Shor, almost 3.5.
But their surrender dates were delayed, initially due to the Covid pandemic and later because the judge was considering throwing out the verdict.
As a result, neither man served any part of his sentence.
“We are pleased that Mr. Ahuja can finally put this ordeal behind him without having to spend a day in jail,” his lawyers, Richard Tarlowe and Roberto Finzi, said in a statement.
“After years of litigation, we are pleased to put this matter behind us with no additional punishment beyond the punishment already inflicted by the process,” Shor’s lawyer, Justin Weddle, said in an email.
Federal prosecutor Daniel Gitner defended the deal before the judge on Friday, saying Ahuja and Shor had already made “substantial restitution” to investors.
“Today’s guilty pleas to securities fraud bring to a close the defendants’ scheme to mismark their funds’ books,” U.S. Attorney Damian Williams said in a statement.
“This office stands by this prosecution, and is pleased that this matter has resolved with the defendants’ acceptance of responsibility.”
“I tried my hardest to conduct a fair trial,” Failla said in overturning the verdict.
“I no longer have confidence in the fairness of the trial.”
She declined to dismiss the charges against Ahuja and Shor though, saying that the errors made by the government — while “unacceptable” — were not severe enough to warrant throwing out the case.
Ahuja was a senior mortgage bond trader at Lehman Brothers, RBS Greenwich Capital and Deutsche Bank AG for four years before co-founding Premium Point in 2008.
The firm initially focused on the U.S. residential loan market and began amassing bonds backed by distressed assets in the wake of the global financial crisis.
It later expanded into the jumbo loan and home rental businesses and managed about $2 billion of assets at its peak.
Premium Point began winding down in late 2016 after posting large losses.
The fund revealed the following year that federal securities regulators were examining the way it valued its assets.
Its mortgage credit funds filed for bankruptcy protection in March 2018, and Ahuja, Majidi and Shor were charged two months later.
Former Chief Risk Officer Ashish Dole also pleaded guilty and testified for the prosecution at the trial.
The case is U.S. v. Ahuja, 18-cr-00328, U.S. District Court, Southern District of New York (Manhattan), via Bloomberg.
Should hedge funds be allowed to get away with fraud?
It’s curious how these hedge fund co-founders were sentenced to prison but managed to get away with jail time.
What does this tell us about our system?
Why do you think this happened?
Was the government paid out?
I’m interested to know what you think; leave a comment below.
You can follow me on: Twitter | Facebook | LinkedIn
Check out: Extradition Lawyers
You know the story the baker told me about the guy he had steal a loaf of bread because he was hungry. That he felt bad for the guy because he knew he was hungry. Punishment was given and the man served his sentence. Owing the courts and restitution. For a loaf of bread. Before I go on… I just read stories about rich stealing 100’s of millions and never seeing the inside of a prison or jail. Nobody needs to explain how the law does not work. Also still upset at robinhood luring people into a total bloodbath. Then on top having to pay taxes when in the end you are down what they say you are up.
Let’s start a discussion!